Ellerston Global Equity Managers Fund – GEMS C

Ellerston Global Equity
Managers Fund – GEMS C
PERFORMANCE REPORT March 2015
Fund performance^
Investment Objective
The investment objective is to generate
superior returns for Unitholders with a focus
on risk and capital preservation.

Global long/short equity
Overlays fundamental stock selection
with macroeconomic outlook
Bias toward Australia
Key Information
Class Inception Date
1 Dec 2009
Fund Net Asset Value
A$130M
Liquidity
Monthly
Application Price
A$1.6457
Redemption Price
A$1.6375
No Stocks
107
Gross Exposure
160
Net Exposure
68%
Management Fee
1.5% p.a
Buy/Sell Spread
0.25%
Performance Fee
16.50%
Firm AUM
A$4,096M
Ellerston Capital Limited
ABN 34 110 397 674
AFSL 283 000
3 Months
1 Yr
3 Yr p.a
Class Since
Inception p.a
3.58%
10.46%
20.79%
13.26%
11.43%
Commentary
Investment Strategy


GEMS C Net
1 Month
After coming close to breaching the 6,000 point barrier several times during
March, the local S&P/ASX 200 finished largely unchanged (-0.06%) by
month end, printing its strongest first quarter (+10.3%) in 24 years to end at
5,891. Global markets sold off initially as speculation around an imminent
rate hike in the US mounted. Subsequent more dovish-than-expected
commentary in the Fed’s March statement alluded to a delay in the muchanticipated rate hikes, which ignited a relief rally midway through the month
and caused global indices to reclaim some lost ground. Despite this, the
MSCI World index (-1.6%), the S&P500 (-1.6%) and the FTSE 100 (-2.5%)
all ended lower. Europe, as measured by the Euro Stoxx 50, outperformed
(+2.7%), led by Germany’s DAX up 5.0%, with QE purchases kicking off
from the outset, as did Japan with the Nikkei 225 posting a 2.2% gain.
Chinese shares were the clear outlier during the month, with the Shanghai
300 rallying 13.4%. They were helped by comments from PBOC governor
Zhou Xiaochuan stating that growth had slowed “a bit too much” and that
policy makers had scope to respond with interest rates and other quantitative
measures following a below-trend February growth print of 6.3% y/y.
Long-term bond yields continued to fall globally, supported by abundant
central bank liquidity and weak commodity prices. European bonds rallied
strongly with the commencement of the ECB’s monthly purchase of 60 billion
in bonds.
We remain constructive on equity markets as they are supported by easy
global monetary policy and the low level of interest rates currently. While
equity markets are expensive relative to historical levels based on P/E ratios,
they are undervalued relative to bonds. The highest yielding bond markets
in the developed world are Australia at 2.35% and the United States at
1.9%. The majority of European bond markets yield under 1%, with the
German 10 year bond yielding 10 basis points and the 10 year Swiss bond
yielding negative 20 basis points. Overall, 16% of global bonds have a
negative yield currently.
Level 11
179 Elizabeth Street
Sydney NSW 2000
Tel: 02 9021 7797
Fax: 02 9261 0528
info@ellerstoncapital.com
www.ellerstoncapital.com
APIR Code: ECL0006AU
The portfolio is positioned towards Australia, Europe and Asia on a net basis. Our Australian positions results
from our bottom up analysis, finding a number of attractively valued companies, with positive long term growth
outlooks. Prominent among these would be Aristocrat Leisure, Bellamy’s and Blackmores. European markets
are supported by quantitative easing and the associated currency weakness that typically accompanies it. Low
rates and a weak currency are starting to come through in a better economic outlook for Europe. Asian markets
are supported by economic growth and attractive valuations.
We have a low net exposure to the U.S., as valuations are full and monetary conditions are expected to tighten
later in the year. The Fed is expected to start raising interest rates in September. This has led to a significant
strengthening of the U.S. dollar, which impacts U.S. corporate earnings, as 50% of earnings are sourced
offshore. Consensus is now expecting S&P earnings to be flat to down in 2015.
A recent addition to the portfolio is Elis SA, the European leader in the rental and maintenance of textile and
hygiene articles and well-being items. The business should grow at around 3-4% organically and another 2-3%
per annum through bolt on acquisitions. There are significant opportunities for the company to grow outside of
France.
Ellerston Global Equity Managers Fund – GEMS C Monthly Newsletter
2
Market Exposure as a % of NAV
GEMS C Fund Performance & Volatility ^
16%
180%
160%
14%
Gross
120%
Since Inception Return % p.a.
140%
Net
100%
80%
60%
40%
20%
0%
-20%
GEMS C Fund
Europe
Australia
& NZ
Asia
Emerging North
Markets America
Grand
Total
S&P/ASX 200
Accum Index
(AUD)
S&P 500 US
Accum Index
(USD)
MSCI World
Accum Index
12%
10%
8%
6%
MSCI Europe
Accum Index
4%
2%
MSCI Asia
Pacific Accum
Index
0%
0%
5%
10%
15%
Standard Deviation (Since Inception) % p.a. #
GEMS C has achieved returns with a lower risk
than all of the indexes over the same time
period.
Top Holdings (Alphabetical, Long only)
•
•
•
•
•
Aristocrat Leisure
Bellamy’s Australia
Bentham IMF
Blackmores
Comcast
•
•
•
•
•
Enel SpA
Medtronic
Orion Engineered Carbons
Reckitt Benckiser
Verizon
Key Service Providers
-
Registry: Link Market Services Limited
Auditor: Ernst & Young
Prime Broker: Morgan Stanley Intl & Co PLC & Goldman
Sachs International
Administrator: Citco Fund Services (Australia) Pty Ltd
Custodian: State Street Australia Limited
Material Matters
During the month there were no material changes to the Fund in terms of its risk profile, investment strategy or changes to investment staff which
would impact this strategy. There have been no changes to the key service providers described above.
Disclaimer
^ Actual performance for your account will be provided in your periodic statement which may vary from that set out in this newsletter and will vary for investments made in different classes, or at
different times throughout the year. Some performance data is estimated and preliminary and subject to change.
The returns and risk of the Fund and the relevant Indices are net of taxes, fees and expenses and assuming distributions are reinvested. The performance figures presented are for the Ellerston
Global Equity Managers Fund GEMS C Units. The one month return figure may be an estimate and not the final return. This estimate also impacts other performance information provided.
Estimated performance figures are preliminary and subject to change. Returns for other classes may differ slightly. Past performance is not indicative of future performance. Ellerston Capital
Limited ABN 34 110 397 674 AFSL 283 000 is the responsible entity of the Ellerston Global Equity Managers Fund ARSN 118 887 095 (Fund). This newsletter has been prepared by Ellerston
Capital Limited without taking account of the objectives, financial situation or needs of investors. Before making an investment decision you should consider your own individual circumstances
and obtain a copy of the Product Disclosure Statement for the Fund dated 31 January 2014 which is available by contacting Ellerston Capital. This material has been prepared based on
information believed to be accurate at the time of publication. Assumptions and estimates may have been made which may prove not to be accurate. Ellerston Capital undertakes no
responsibility to correct any such inaccuracy. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information. To the full extent permitted by law,
none of Ellerston Capital Limited, or any member of the Ellerston Capital Limited Group of companies makes any warranty as to the accuracy or completeness of the information in this
newsletter and disclaims all liability that may arise due to any information contained in this newsletter being inaccurate, unreliable or incomplete.
# The standard deviation is often used by investors to measure the risk of an asset. The standard deviation is a measure of volatility: the more an asset’s returns vary from the average return,
the more volatile the asset. A higher standard deviation means a greater potential for deviation of return from the average return of the asset.
Ellerston Global Equity Managers Fund – GEMS C Monthly Newsletter
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